Favorable Crops Supply: Soybean Meal Hitting 5-yr Low

Local corn prices in mid Dec-24 still flattish at IDR4,600/kg, while SBM prices fell to USD285/ton (-2.7% MoM, -38.3% YoY), marking the lowest point YTD and in the last 5 years.
- Soybean Meal prices to remain subdued in 2025: Soybean prices have faced significant downward pressure throughout 2024, driven by an increasingly comfortable global supply balance. Ending stocks for the 2024/25 season are projected to reach a record high of nearly 132 million tons, reflecting a 17% YoY increase. Looking ahead to 2025/26, global soybean stocks are expected to rise further despite forecasts of smaller harvests in the U.S. and Argentina. Early estimates from the USDA and ING suggest that even with these declines, the market will remain well-stocked, keeping prices under pressure.
Adding to the bearish outlook, favorable growing conditions have boosted global supply, while weaker-than-expected Chinese demand has dampened export activity. Although Brazil and Argentina anticipate bumper harvests, the impact of this additional supply will not be realized until early 2025. Despite these clear signs of an oversupplied market, uncertainty remains. Geopolitical factors, particularly U.S.-China trade tensions, could disrupt flows and create volatility in the coming year. Nevertheless, the global soybean market is expected to stay well supplied through 2025
- Local corn to be supported from Govt. Food Self-Sufficiency program. The program include producing and increasing agricultural land productivity, as well as village, regional, and national food barns. As an example, The Ministry of Agriculture (Kementan) is targeting to open 1 mn hectares of new land which will be used to increase corn production. National corn production is projected to experience a surplus of 320k tons this year after increasing by around 3.05% to a total of 14.51 mn tons. Thus, we are expecting corn prices to remain favorable.

Maintain O/W on Poultry Sector

We still maintain our O/W call on the sector, with pecking order of JPFA > CPIN. The sector's catalyst remain dependent on 1) lower feed raw materials cost; 2) govt.s free nutritious program to boost poultry demand and support prices. Expecting more balanced supply demand on poultry.
Our TP for JPFA is at IDR2,500/sh (reflecting PE25'F of 8.7x at -0.5 stdv of 5-yr historical mean), followed by CPIN at IDR6,100/sh (reflecting target PE25'F of 25.6x at -0.5 stdv of 5-yr historical mean). Risks to our call include: sudden change in regulation for poultry, spike in raw material prices, lower than expected demand.

Poultry - Enjoying the Festive Season

Poultry - Enjoying the Festive Season

Ervina Salim

20 December 2024 - 07.00am

Poultry - Enjoying the Festive Season

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